Indonesia’s Breakthrough Year for Foreign Investment in 2022

Posted by Written by Ayman Falak Medina Reading Time: 6 minutes

Indonesia received some US$43 billion in foreign investment in 2022, the highest in the country’s history and an increase of 44 percent from 2021. This was mainly supported by the metal mining industry through which the Indonesian government is seeking to develop its downstream capabilities, particularly for nickel.

According to recent data released by the Indonesian Investment Coordinating Board, or the BKPM, Indonesia received US$43 billion in foreign investment in 2022, the highest in the country’s history and an increase of 44 percent from 2021. When combined with domestic investments, Indonesia saw 1,207 trillion rupiah (US$80 billion) in investments, an increase of 34 percent from the previous year.

Foreign investment in Indonesia in 2022 was dominated by the metal mining and mining sectors, which saw more than US$16 billion in FDI combined.

For 2023, the government is expecting 1,400 trillion rupiah (US$92 billion) in combined foreign and domestic investments, and 1,650 trillion rupiah (US$108 billion) in 2024.

Top FDI sources in 2022

The top five sources of foreign investment in Indonesia are as follows:

  1. Singapore – US$13.3 billion;
  2. China – US$8.2 billion;
  3. Hong Kong – US$5.5 billion;
  4. Japan – US$3.6 billion; and
  5. Malaysia – US$3.3 billion.

Notable sectors that attracted major foreign investment

Indonesia’s basic metal industry tops FDI received in 2022

Indonesia’s basic metal industry sector received the most foreign investment in 2022. Data from the BKPM showed that the sector saw US$11 billion worth of FDI or some 24 percent of the total FDI the country received in 2022.

The country is seeking to exploit its abundance of mineral resources to develop its downstream mineral industry, particularly for nickel. Indonesia is home to the world’s largest nickel reserves, which are at an estimated 22 million tons, and the country is leveraging those reserves as well as other minerals to attract FDI in the development of local smelters. As such, the export value of processed nickel contributed significantly to government revenues in 2022, reaching US$30 billion; a huge increase from just US$1 billion in 2015.

Nickel mining is one of the top sectors where Indonesia is expected to see increased foreign investment in 2023.

Nickel is an important component in the production of stainless and electric vehicle (EV) batteries. Indonesia is aiming to be a global EV manufacturing hub and has targeted to become one of the top three producers of EVs and EV batteries in the world by 2027. The government has courted major EV makers, such as Tesla and China’s BYD, to establish their operations in the country.

Further, Hyundai Motor Group, in collaboration with LG Energy Solutions, is building one of Southeast Asia’s largest EV battery factories in Indonesia – targeted for completion in 2023 and to start production in 2024. The facility is expected to have a capacity of 10 Gigawatt hours (GWh) (one gigawatt equals 1 billion watts of electric power).

FDI in the metal mining sector is expected to continue as Indonesia aims to ban more raw minerals for exports

FDI in Indonesia’s metal mining industry is expected to continue as the government looks to ban more raw minerals for export.

The ban on raw bauxite is expected to begin in June 2023 with the government hopeful that state revenue received from processed bauxite can increase from US$1.3 billion to US$4 billion. The government is also mulling a ban on copper ore and refined tin exports. Indonesia is already the world’s largest exporter of refined tin and has one of the largest copper reserves globally.

The government had previously banned the export of raw tin in 2014. However, the government is eager for investors to establish production facilities to produce other tin products, such as tin powders, tin rods, and tin chemical production.

Further, with the continued volatility of oil prices caused by the Russian-Ukraine conflict coupled with the race to reach net-zero emissions, there is a surge in demand for critical minerals. These are commodities deemed essential to generating low-emission energy – nickel, lithium, graphite, and cobalt for energy storage; uranium, rare earths, and silicon for wind, solar, and nuclear energy creation; and aluminum and copper for energy transmission.

With the abundance of these minerals in Indonesia, the country will be at the forefront of the global energy transition.


FDI in Indonesia’s mining sector reached US$5.1 billion according to the BKPM in 2022, placing the sector second behind the metal industry. In addition to mineral ores, the country is home to an abundance of coal and gold of which the majority is exported.

Indonesia is the world’s third-largest exporter of coal and the world’s largest exporter of thermal coal. Around 687 million tons of sedimentary rock were produced in 2022, from which 494 million tons were exported. For 2023, the government is targeting coal exports to reach record 518 million tons out of a total production of 695 million tons.

In terms of gold production, Indonesia produced 70 metric tons in 2022, ranking it ninth globally. At its height, the country produced 139 metric tons of gold in 2019. Further, Indonesia’s estimated 3.5 billion tons in gold reserves make it the fifth largest reserve in the world after Australia, Russia, South Africa, and the United States.

As such, the country produces some four percent of global gold production, half of which originates in the Grasberg mine, located in Papua province. The mine is believed to contain the world’s largest gold reserves (approx. 67 million ounces) and is operated by local company PT Freeport Indonesia and American mining giant Freeport-McMoRan.

PT Freeport Indonesia used to be 90.64 percent owned by Freeport-McMoRan; however, in 2018 the Indonesian government negotiated new contract terms and became the majority shareholder of PT Freeport Indonesia.

Chemical and pharmaceutical industry

Indonesia’s chemical and pharmaceutical industry saw US$4.5 billion in foreign investment in 2022.

Indonesia is the largest pharmaceutical market in Southeast Asia and is expected to expand to over US$11 billion in 2025 from US$7.6 billion in 2020. However, the industry is still highly dependent on the import of raw materials – some 90 percent of the pharmaceutical raw material supply. Generic drugs are the largest segment of the pharmaceutical market.

Demand for pharmaceutical products and healthcare, in general, is increasing in Indonesia mainly due to a rapidly growing consumer class and better access to healthcare facilities. The country has the world’s largest free healthcare program with some 246 million participants. Those registered with the BPJS program are eligible to receive free health services ranging from simple dental check-ups to serious procedures, such as organ transplants.

As such, given the market size, urban lifestyles, and increasing government spending, the pharmaceutical industry presents a lucrative investment opportunity. Further, the growth of urban lifestyles has resulted in the prevalence of lifestyle diseases, such as diabetes, cardiovascular illness, and gastric conditions, and thus will require investments to shift from generic drugs to niche products.

Transportation and telecommunications

According to the BKPM, transportation, and telecommunications received US$4.1 billion in foreign investment in 2022.

As an archipelago that covers over 17,000 islands,  the development of transportation has been challenging for Indonesia, and the country has one of the highest logistic costs in Southeast Asia. Improving the connectivity between the islands is crucial to not only lowering logistic costs but also boosting business competitiveness.

There are many regions, particularly in the east of the country, where development has lagged and requires investment in public transport and infrastructure. From 2019 up to 2024, the government is seeking to invest US$430 billion in infrastructure programs with the majority taking place in the transportation sector. The largest project is the Trans-Sumatra highway project, which is expected to span 2,900 km and cost US$33.7 billion. More than 1,000km has already been completed.

With regards to telecommunications, the sector is undergoing massive transformation, driven by increasing numbers of cellphone and internet users. With over 355 million mobile cellular subscriptions, Indonesia has the third largest cellular market in the world only behind India and China. According to Fitch Solutions, there were an estimated 258 million 4G subscribers and 79 million 3G subscribers.

State-owned telecommunications giant Telkomsel launched the country’s first 5G services in 2021 and predicts there will be some 191 million 5G subscribers by 2030. There are opportunities for investors to provide growth in network data, particularly since 70 percent of Indonesians have access to the internet.

Further, foreign investment is needed to improve broadband internet connectivity. Indonesia’s complex geography has often hampered the development of fixed broadband infrastructure. As such, businesses can invest in wireless broadband services to provide affordable internet access in rural areas, as well as deploy ICT infrastructure to connect these rural regions.

2023 outlook

The Indonesian government is confident it can achieve its target of attracting 1,400 trillion rupiah (US$92 billion) in combined foreign and domestic investments. The metal mining sector will continue to be at the forefront of these investments as the government doubles down on its efforts to develop the downstream mining industry.

However, investors will be wary of a slowdown in commodity prices in 2023 and analyzing the government’s approach to hold inflation at the three percent target for the year.

About Us

ASEAN Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia and maintains offices throughout ASEAN, including in Singapore, Hanoi, Ho Chi Minh City, and Da Nang in Vietnam, in addition to Jakarta, in Indonesia. We also have partner firms in Malaysia, the Philippines, and Thailand as well as our practices in China and India. Please contact us at or visit our website at